Are There Sectoral Anomalies Too? The Pitfalls of Unreported Multiple Hypothesis Testing and a Simple Solution

Michael Greenstone and Paul Oyer ()

Review of Quantitative Finance and Accounting, 2000, vol. 15, issue 1, 37-55

Abstract: The recent emphasis on sector-specific investment strategies has led to the emergence of industry-specific calendar anomalies, notably the technology sector "summer swoon." A standard ttest implies that these price movements provide arbitrage opportunities. However, this test fails to account for the many tests that may have preceded the swoon's discovery. We propose the use of the Bonferroni correction to account for this unreported testing. Its application reverses the conclusions about the summer swoon and finds no evidence of calendar-based price patterns in any other sector. We also use the Bonferroni correction to revisit previously documented, market-wide, anomalies. Conclusions about the most widely cited anomalies (e.g., the January effect) are unchanged, but evidence for some other "anomalies" is substantially weakened. Our results emphasize that in evaluating a proposed anomaly, sectoral in nature or otherwise, it is crucial to account for the hypotheses that were likely to have been tested but not reported. Copyright 2000 by Kluwer Academic Publishers

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://journals.kluweronline.com/issn/0924-865X/contents link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:15:y:2000:i:1:p:37-55

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().